Warehouse Wisdom. Weekly. 11/24/2023

Happy Black Friday!

Hope you had a wonderful Thanksgiving. We’re smack dab in the middle of the holiday shopping season, and it’s online retail that is leading the charge and our headlines this week. With more growth than traditional retail this year and higher expectations moving forward, e-commerce deserves some major attention. From smart phone purchasing to fast and easy site navigation, this latest research from Bizrate Insight will help you keep your website in step. Just make sure you avoid mishaps with promo codes and excessive scrolling, among other pet peeves.

But that’s not the only goodie we have in store for you on the day after Turkey Day. This week, we’re focused on improving ‘ops’, whether getting better parcel rates, employing better shipping strategies for profitability, utilizing tactics to retain more key employees (or use robots), and using different sourcing strategies. Let’s dive into some of that leftover turkey and dressing!

LOGISTICS VITALS

ONILNE E-COMMERCE SEARCHES AND DESTROYS IN STORE SALES

The spotlight seems to be on U.S. online shopping, with e-commerce growth outpacing its older brother, traditional retail, by a healthy margin. Canada’s projected results seem to be a bit stingier…

• 5% - the growth in U.S. online retail sales from November 1-20 versus the same period last year

• 5.4% - the year-over-year increase in U.S. online retail sales expected from Thanksgiving through Cyber Monday over last year’s results

• 6.8% - the total growth in U.S. online sales this year compared to last year

• 2.8% - the expected growth in online retail sales in Canada in 2024 versus 2023

SHIPPING AND FREIGHT

SMALL PARCEL WAR SPELLS VICTORY FOR SHIPPERS

Is a small parcel shipping war brewing in the US? According to some freight consultants in the “know”, the answer is YES. Thanks in large part to weak shipping demand, an onslaught of new carriers (such as Amazon’s shipping service and a multitude of newer regional shippers such as OnTrac, GLS, or Better Trucks), the UPS’ teamster union shakeout, and low 2024 growth forecasts, shippers like you stand to win the battle – if you take advantage of your negotiating power while you can.

Some freight consultancy companies who review shippers’ contracts have found that FedEx and UPS are offering discounts not seen since before the pandemic – even for small and mid-sized SMBs that traditionally lack the buying power to qualify for large breaks. Discounts are being given for both base rates as well as surcharges. In some cases, carriers are even paying early termination fees. Wow!

So what can you do to take advantage of this opportunity to pounce on the enemy? First, confidently negotiate those contracts with FedEx and UPS, because they don’t want to lose you. Second, if you’re not intimidated by managing multiple carriers and are hungry for aggressive rates, it may be time to reach out to some of the newer regional players to see if you can shave off even more costs.

WAREHOUSE & SHIPPING OPERATIONS

REBELLION MOUNTS AGAINST FREE SHIPPING

Now that you’re negotiating those small parcel shipping rates, why not spend a little bit of time on shipping strategy. More specifically, how to address the elephant that has been in the room for years – FREE shipping.

Let’s face it, shipping never was FREE. To pull it off, companies have long had to employ a combination of creative product pricing, order minimums, or other sleight of hand tricks. Even Amazon, whose fulfillment costs for 2022 were about 35% of net product sales (and growing faster than revenue), boosted its Prime membership fee by $20 to $139 and added surcharges for orders below $25 to help cover shipping fees.

Maybe it’s time to loosen the reigns on the Free shipping strategy. In a recent survey by First Insight, a third of the respondents – 62% more than last year – said they’d be willing to pay shipping costs of at least $10. And 74% of shoppers say that quality and reliability of shipping impact their decisions. Another unexpected surprise – the survey found that rapid deliveries aren’t as important either, with most respondents indicating that they are good if purchases arrive between three to five days versus two days.

So perhaps it’s time to think about incentivizing ground deliveries, showing customers shipping value, and working like mad with your freight carriers to ensure high quality and reliability.

WAREHOUSE AND LOGISTICS JOBS

NEW TACTICS ARE BREWING TO AVOID LABOR SHORTAGE LANDMINES

Now that you’ve battle-tested shipping, let’s talk labor. Staffing is such a problem that companies are going to great lengths and employing levels of creativity not seen before to find an edge. As an example, UPS recently announced that it is expanding its childcare program to more facilities in 2024 to boost warehouse retention. The program provides on-site day care for employees when their typical daycare options fall through and is subsidized in part by UPS. That’s a good idea to get those creative juices flowing…

But creative incentives aren’t the only ways companies are using to combat the labor challenges. According to a survey commissioned by ResumeBuilder.com, 37% reported workers were laid off because of AI in 2023, and 44% that use AI or plan to use it in 2024 stated they plan to lay off employees due to AI in that year. While most of the replacement is coming in the form of customer support and research, larger companies are leading the shift in the warehouse itself. UPS recently opened an automated warehouse where robots outnumber people 15 to 1!

Is this a passing fad, or a glimpse into what the future will hold? ARC Advisory Group’s is forecasting double-digit growth in warehouse robotics…

ONLINE MARKETPLACES

AMAZON REPORT GIVES INSIGHTS INTO THE ENEMY

A report by Fortunet Partners Ltd. this past week unleashed a treasure trove of delectable nuggets about the nearly 2 million brands selling on Amazon. The report provides a detailed look at 18 key metrics. How does your company stack up?

“High performers” averaged a 15% repeat customer rate, 4.6 product star rating, 15% market share, and sky high 25% conversion rate. Not quite there yet? The study recommends the following to boost your performance: prioritize product quality and after-sale service, monitor customer feedback and address customer concerns, develop a unique value proposition for differentiation, highlight unique selling points, and respond promptly to customer inquiries.

And you don’t have to do it all on your own. Use AI to help craft personalized content and anticipate consumer desires, and see what your peers are up to and make sure you’re doing everything you can to compete.

PRODUCT SOURCING

NEW MANUFACTURING HUB MOUNTS AMBUSH ON THE CURRENT POWER

Last week we uncovered that near shoring is growing, but the balance of power in the manufacturing world still rests outside of North and South America. As manufacturers continue to find alternatives to Chinese manufacturing, the clear winner seems to be India. A new study by Boston Consulting Group has found that India’s exports to the U.S. increased by a massive $23 billion from 2018 to 2022, which represents a 44% increase over the period. But there’s more – 90% of the respondents of the survey indicated that they relocated at least some of their production away from China over the last few years, and the same amount say they plan to continue to make similar moves over the next 5 years!

But with only 55% of those surveyed having achieved their overall objectives of cost savings and faster time to market, the door is still open for other countries to win a larger share of production and become the next powerhouse. Will it be Mexico or Southeast Asia? Or could it even be the U.S. itself? With 94% of U.S. manufacturers reporting salary increases to its employees and further investment in robotics and technology, that goal still seems far-fetched. Nonetheless, the stakes are high for finding a winning destination for manufacturing and production.

WAREHOUSE QUICK DELIVERIES

WALMART INVADES LOGISTICS AND E-COMMERCE LANDSCAPE, AND MORE…

• Walmart launches parcel stations for super fast delivery…

• And adds new holiday tools for SMBs

• Non-gift holiday spending to drop 26%

• Amazon to train 2 million in AI

• E-commerce security gaps are on the rise

• Best Buy Q3 sales drop again

• Potential federal labor law change will bring trucker’s overtime pay back into play

• Layoffs and bankruptcies in logistics pile up sky high